Deadline Approaching for Americans Living Abroad to File US Tax Return

American citizens living and working in other countries have a tax deadline coming up! Here’s the information you need to know now.

1. You probably need to file an income tax return in the United States.

US citizens living abroad are subject to tax on their worldwide income. That means expatriates often need to file tax returns with the IRS. American expats need to file a tax return for the year 2017 if they earned at least $10,400 (or the equivalent in foreign currency).

2. Your deadline to file an income tax return in the United States is Friday, June 15, 2018.

This is the deadline to file your Form 1040 for the calendar year 2017.

You might be wondering: aren’t US tax returns due on April 15th? Indeed, April 15th (or this year, April 17th, because the 15th fell on a Sunday and the 16th fell on a holiday) is the normal deadline. But expats have a special deadline of June 15th. This special deadline is available to all US citizens living abroad and resident aliens, including green card holders, who are:

Living outside the United States or Puerto Rico, and their main place of business is also outside the United States or Puerto Rico; or

Currently serving in the military or navy, and their post of duty is outside the United States or Puerto Rico.

3. You can get more time to file your US tax return by filing an extension.

Doing this will move your tax filing deadline from June 15th to October 15, 2018. This is done by preparing and filing Form 4868 with the Internal Revenue Service.

4. If you owe US tax, you should pay by the June 15th deadline to avoid penalties.

Tax payments are also due June 15th. Federal taxes can be paid online at irs.gov/payments.

For tax payments made after April 15th and on or before June 15th, the IRS will charge interest at a rate of 5% annually (prorated to the number of days after April 15th that the payment is made).

Tax payments made after June 15th are subject to a late payment penalty — in addition to interest. The late payment penalty is charged at a rate of half of one percent (0.5%) per month for each month or part of a month that a tax payment is made past the June 15th deadline.

To find out if one needs to make a tax payment to the IRS by June 15th, the best course of action is to draft out one’s US tax return for the year 2017.

5. You may need to pay US tax on accumulated earnings from a “controlled foreign corporation.”

This applies only to Americans living abroad who have set up corporations or other legal entities for their business operations.

For example, expats in the United Kingdom sometimes set up a private limited company for their business activities. Similarly, some expats in Portugal set up “Sociedad por Quotas” (abbreviated Lda), which is also a private limited company.

Expats with foreign corporations may need to make payments of a new “transition tax” starting with their 2017 US tax returns. This is a new tax specifically targeted at retained earnings sitting inside of foreign corporations.

6. You might also need to file a Foreign Bank Account Report.

Foreign bank account reports are separate from the income tax return. The income tax return gets filed with the IRS and relates to your income and deductions. The foreign bank account report is filed with the Financial Crimes Enforcement Network (FinCEN for short) and relates to money sitting inside of bank accounts, investment accounts, retirement accounts, cash-value life insurance and other financial accounts if the institution is located outside the United States.

Foreign bank account reports have a filing deadline of October 15, 2018, for the calendar year 2017.

Don’t let the filing deadlines get you down. The tax advisors at Visor can help you file an extension and prepare your US tax return and foreign bank account report. Contact us today.